Binding High Court precedent left court with no room to make orders sought
In Cayzer v Phoslock Environmental Technologies Ltd [2026] FCA 438, decided on 15 April 2026, Justice Stewart declined to make "soft class closure" orders that all parties had jointly sought by consent in a shareholder class action, ruling the court had no power to make them.
After raising the issue with the parties, he made amended orders removing the impermissible provisions, and issued a pointed rebuke of the lawyers involved.
Edwin Paul Cayzer brought the action against Phoslock Environmental Technologies Ltd, former Chairman Laurence Freedman, former Managing Director Robert Schuitema, and former auditor KPMG. The applicant alleges Phoslock failed to disclose to the ASX important information about its business operations in China, which meant its financial statements between 11 October 2018 and 17 September 2020 did not give a fair and true view of its financial position. Freedman and Schuitema allegedly breached their obligations as directors by authorising and making representations to the market that Phoslock's financial reports gave a true and fair representation of the company's financial position and complied with accounting standards. KPMG allegedly failed to properly audit Phoslock's accounts. All respondents deny the allegations. KPMG has filed a cross-claim against Phoslock, Freedman and Schuitema, alleging that to the extent it is liable to group member claims, those respondents are liable to KPMG for that same loss.
The parties proposed consent orders restricting settlement benefits from a mediation on 11 June 2026, or within two months thereafter, to group members who registered by 27 May 2026. Unregistered members who did not opt out would remain bound by any approved settlement but could not share in proceeds without leave of the court. Justice Stewart found these amounted to "soft class closure" in anticipation of settlement negotiations, observing that while all parties may share a common interest in such orders, they are not necessarily in the interests of group members.
Three authorities addressed the issue. In Parkin v Boral Ltd [2022] FCAFC 47, the Full Federal Court decided it had no power to make such orders, on the condition that it did have power to order notice be given to group members that if they do not register and the matter settles, an order excluding them from settlement benefits will be sought under s 33V. The NSW Court of Appeal in Haselhurst v Toyota Motor Corporation Australia Ltd [2020] NSWCA 66 reached the same conclusion, albeit the orders there went further, expressly seeking to extinguish unregistered group members' causes of action. The High Court in Lendlease Corporation Ltd v Pallas [2025] HCA 19 confirmed the condition underlying Parkin v Boral and, as Justice Stewart noted, can be seen to support or confirm its conclusion that no such power exists, making it direct and binding authority against the parties' submission. Parkin v Boral left open the possibility of circumstances where such power might arise, but Justice Stewart found none here.
Counsel for the applicant submitted that Lendlease v Pallas supported making the orders. Justice Stewart found that submission wrong, and observed the respondents' solicitors had impliedly adopted it by agreeing without disagreement. On 3 April 2026, the applicant's solicitor submitted amended orders removing the soft class closure provisions and substituting a notice foreshadowing the intention to seek such an order following any in-principle settlement, without explanation or withdrawal of the original submission. Justice Stewart made the amended orders, noting they would encourage registration and facilitate settlement.
Justice Stewart then addressed lawyers' professional obligations in class actions, emphasising that their paramount duty to the court prevails over duties to clients, reflected in r 3.1 of the Legal Profession Uniform Law Australian Solicitors' Conduct Rules 2015 (NSW) and r 23 of the Legal Profession Uniform Conduct (Barristers) Rules 2015 (NSW). Lawyers in specialist fields must stay current with recent authority, he said, and this obligation is heightened where unrepresented third-party interests are at stake.
"I should not have been asked by the parties to make the soft class closure orders in the form that was presented to me on 25 March," Justice Stewart concluded. "The Court expects more of the lawyers conducting litigation before it."
